Europe styrene market faces mixed signals for June

Focus Article by Truong Mellor

LONDON (ICIS)–Mixed upstream price movements and a weaker Asian market are muddying the outlook for June, sources in the European styrene market said on Thursday, with regional supply still facing restrictions due to various production problems.

While the June ethylene settlement was agreed at an increase of €60/tonne earlier today, European benzene spot numbers have eroded over the course of the month due to limited derivative offtake.

This was largely driven by shutdowns in the styrene and phenol markets in May and counteracted any tightening impact on benzene from various European cracker outages.

With the May benzene settlement agreed at $900/tonne, and June spot deals done earlier this week within a range of $770-780/tonne CIF (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp), the European market looks poised for a decrease on the upcoming monthly contract.

However, the outlook for downstream styrene in June is less clear, with some production issues both in Europe and abroad keeping upward pressure on pricing during May.

“The Trinseo unit at Terneuzen will be out for most of June, and there is another producer with a line down and little coming in from the US,” said one styrene trader. “But still, Asian prices are retreating fast and that cannot be ignored.”

Weak demand in China saw Asian styrene numbers retreat this week, with one source in the region quoting CFR (cost and freight) prices around $1,260/tonne, down by more than $100/tonne from the previous week.

This is despite some supply restrictions due to a spate of turnarounds in the Middle East. Derivative producers in China have scaled back output due to poor offtake from end users, rather than consume the monomer at structurally high prices.

“The forces majeures in the Middle East have had some impact on Europe,” said one domestic styrene trader.

“We could see some more ARA volumes moving to the Mediterranean as a result. June looks tight but the second half of the month and into July looks better.”

The trader added that it was seeing more US Gulf material being offered now, but with prices still above $1,300/tonne amid some tightness and freight rates across the Atlantic currently high, this was keeping any potential supply relief from the US limited.

Nevertheless, ARA spot pricing has gradually eased of this week. June deals were done at $1,405/tonne and $1,410/tonne FOB (free on board) early in the week but prices have since moved lower. A deal for June was done at $1,390/tonne this morning, and offers were later heard at $1,380/tonne.

Some players felt that given the margin erosion on the May Europe barge contract, which was settled at an increase of €20/tonne despite much higher upward movement for raw materials, the June number should rollover in order to recoup this.

Downstream styrenics demand is starting to cool off into June following a strong start to the year. Sources in the polystyrene (PS) market said that there is a sense that prices have become overheated in recent months, and the market is facing competition from other products such as low-priced polyethylene terepthalate (PET).

European expandable polystyrene (EPS) demand is reported as satisfactory but not strong into the second half of 2015. Some uncertainty surrounding feedstock price developments as well as macroeconomic fragility is keeping buyers operating on a hand-to-mouth basis rather than building stock.